Four Rules For Managing Your Aging Parents' Money

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Armed with a financial power of attorney, I take care of the dreaded paperwork for my widowed octogenarian mom who was much happier giving up her checkbook than her car. It’s a big responsibility, not just with regards to time spent, but emotionally, thinking about whether I’m doing the right thing. According to the Consumer Financial Protection Board, which just released a series of guides, Managing Someone Else’s Money, they’re a lot of people like me helping their relatives or friends, and the guides are intended to give the financial caregivers help they need themselves.

About 22 million people age 60 or older have named someone in a power of attorney to make financial decisions for them—and millions of others have court-appointed guardians or other fiduciaries, according to the CFPB. As fiduciaries, there are four basic rules they must follow: act in the person’s best interest, manage money and property carefully, keep money and property separate from their own, and maintain good records.

When CFPB director Richard Cordray announced the release of the new guides, he presented himself as one of the “caregiver generation” the guides are meant to educate, invoking his 95-year-old father. “While he has always been remarkably self-sufficient, everyone needs some help from time to time, and maybe a little more over time,” Cordray said.

Most aging parents don’t have a financial expert as their helper—instead it’s simply a family member or friend they trust. “These ‘lay fiduciaries’ take on the task with the best of intentions. But without the knowledge of what this task actually entails, they may not be able to do a good job. The responsibility can seem overwhelming,” said Nora Eisenhower, assistant director for the CFPB’s Office for Older Americans.

The guides are meant to help people with legal authority to handle other people’s money—but they could be used to serve as a warning for people who are handling other people’s money without the appropriate legal authority. The guides walk financial caregivers through their duties, tell them how to watch out for scams, and list where to go for more help, such as a local Area On Aging.

There are different guides for people in different fiduciary capacities: those holding a financial power of attorney (when you manage someone’s money and property if they are unable to), those named as trustee of a revocable living trust (when you have the power to make decisions about the property and money in the trust), those appointed by a court to be guardians or conservators (when you manage property and money for someone who needs help), and those appointed to manage income from a government agency like Social Security or Veteran’s benefits (when you have the legal authority to manage someone’s federal benefits checks).

The important point is that you’re always acting on behalf of the person whose affairs you’re handling. “It’s not your money!” as the CFPB puts it.

How tricky does all this get? Just when you think you have your duties figured out under one set of rules (say as representative payee for Social Security benefits), you learn there are other federal or state agencies with different procedures and rules. Bernard Krooks, an elder lawyer in New York City, says that when he draws up financial power of attorney forms for clients he includes the power for the agent to sign the representative payee form, the VA Fiduciary form, and the Internal Revenue Service power of attorney form (yes, that’s a separate one). “Otherwise you’d have to anticipate every single agency the person might deal with and sign the appropriate form while they’re okay; it’s insane,” he says.

Yet Krooks notes that there is logic behind all the safeguards: “It’s not like paying someone’s Gap credit card bill; here you may be taking someone’s money.”

I'm an associate editor on the Money team at Forbes based in Fairfield County, Connecticut, leading Forbes' retirement coverage. I manage contributors who cover retirement and wealth management. Since I joined Forbes in 1997, my favorite stories have been on how people fuel ...